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Republic Airways Holdings Inc. shares soared 61 percent Tuesday—the most since the stock began trading in 2004—after the company reported progress in restructuring its Frontier Airlines unit and said it plans to separate itself from the carrier it acquired out of bankruptcy two years ago.

Agreements have been reached to cut lease payments on some planes, defer deliveries of others and return two to lessors, the company said Tuesday morning in a prepared statement. CEO Bryan Bedford said he expects an unspecified number of job cuts, and asset sales and new debt also are being evaluated.

Acquiring Frontier moved Indianapolis-based Republic away from its traditional role of providing regional flights for carriers such as Delta Air Lines Inc. and into competition on main jet routes. Analysts surveyed by Bloomberg project the parent company will post a second straight annual loss in 2011.

“It is time to start to separate the two businesses,” Bedford said on a conference call. Frontier “is going to be attractive either to private equity or our shareholders or possibly to strategic investors.”

Republic surged 61 percent to close at $4.34, the biggest daily percentage gain since its initial public offering in May 2004. The shares have slid 41 percent this year.

Bedford said Republic was hiring advisers to “begin the process of looking for shareholder-friendly options to monetize” Frontier. The turnaround effort at the unit includes parking smaller regional jets to focus on flying larger Airbus SAS and Embraer SA models.

Republic said it reached agreements that cut lease payments on some planes, defer deliveries of others and let it return two planes to lessors in an expanded restructuring of Frontier.

Republic is evaluating selling some unidentified assets and issuing new debt secured by spare parts, according to a statement. Republic said that absent additional action, its unrestricted cash balance may fall as low as $150 million by the end of this quarter.

The company said it achieved “substantially” all of an initial $120 million restructuring of Frontier that included concessions from employees, vendors and aircraft lessors. Republic bought Frontier out of bankruptcy in 2009, breaking from its traditional role of providing regional flights for carriers such as Delta Air Lines Inc.

“We are beginning to see the benefits of our network-restructuring efforts,” Bedford said in the statement. “Our team remains focused on optimizing the fleet at Frontier to produce a sustainable and profitable network.”

Republic on Monday night reported a 58-percent drop in profit in the third quarter despite a jump in revenue.

The company also said it had reached agreement with lessors on cutting Airbus SAS A319 payments by $26 million next year and returning four aircraft, as it tries to turn around unit Frontier Airlines.

Republic said it earned $9 million, or 18 cents per share, in the period ended Sept. 30, down from $21.2 million, or 58 cents per share, in the third quarter of 2010.

Operating revenue rose to $767.9 million, a 7.9-percent improvement over the $711.9 million it reported a year ago.

Higher fuel costs for its Frontier unit dragged on Republic earnings. Per-gallon costs in the quarter rose 46 percent over the previous year, from $2.32 to $3.38, an additional expense of $61.6 million.

The carrier will return four Airbus SAS A319s in the first quarter of next year, it said in prepared statement Tuesday morning. The company has also deferred delivery of four Embraer SA E190 planes and agreed to return two others to lessors ahead of schedule.

Republic said it has achieved “substantially” all of its restructuring goals for Frontier under a plan designed to generate $120 million in annual improvement at the unit, which was bought out of bankruptcy in 2009. That helped the carrier post better-than-estimated third-quarter ex-item net income of $20.4 million or 40 cents a share.

Republic was expected to post ex-item net income of 24 cents a share based on the average of seven analyst estimates compiled by Bloomberg. A year earlier, net income, excluding items, was $25.9 million.

The carrier had $15.3 million of ex-item, pre-tax income at its branded operations in the quarter. The company also flies regional services for other carriers, such as Delta Air Lines Inc. and American Airlines.

Republic completed a previously announced agreement to buy 80 A320neo planes from Airbus, it said. The company’s total operational fleet declined by three planes to 279 in the third quarter.

The carrier will accept two Embraer E-190 planes in the fourth quarter. It will return two E-190s to lessors late next year.

An agreement with Embraer on deferring new planes would make about $20 million in cash available to Republic, Bedford wrote in a memo to employees last month.

The company is considering further steps to boost liquidity, which may include issuing debt backed by spare parts and selling some assets, it said without elaboration.

Steps under study in a second round of restructuring at Frontier, worth about $113 million, include selling flight slots at Ronald Reagan Washington National Airport valued at almost $50 million, and 10 Embraer E190 jets, for a total of about $40 million, according to Bedford’s memo.

Frontier also saw a 1.9-percent increase in passengers in October from a year earlier, its fourth straight year-over-year rise in monthly passengers. Frontier counted 1,233,989 passengers, up from 1,210,648 in October 2010.

The company also reported that third-quarter profit excluding some items fell to $20.4 million, or 40 cents a share, from $25.9 million, or 70 cents, a year earlier. On that basis, Republic beat the 24-cent average of seven analyst estimates compiled by Bloomberg.

Including $10 million in pretax costs related to a storm in Denver and expenses linked to fuel-purchase contracts and fleet changes, net income declined 58 percent to $9 million, or 18 cents, from $21.2 million, or 58 cents. Revenue increased 7.9 percent to $767.9 million.

The company earlier said it would maintain a minimum unrestricted cash balance of $200 million, a goal it fell short of last quarter.

Concessions from lessors will reduce the company’s Airbus SAS A319 lease payments by $26 million in 2012. Republic will return four A319s in 2012’s first quarter. While Republic will accept of two Embraer SA E190 planes this quarter, it deferred delivery of four more E190s for an unspecified time and will end leases early on two additional E190s, returning them to lessors in late 2012.

Republic said it completed a previously announced agreement to buy 80 planes from Airbus that it expects will enter Frontier’s fleet in 2016’s second. It also finished up an accord with engine maker CFM International Inc. for a fuel-burn guarantee on the new Airbus planes that sets future spare engine pricing and reduced overhaul costs for existing Airbus engines.

Steps under study in a second round of restructuring at Frontier, totaling about $113 million, include selling flight slots at Ronald Reagan Washington National Airport valued at almost $50 million, and 10 Embraer E190 jets, for about $40 million, according to Bedford’s memo.